Mary Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are listed below: Maintenance 200,000.00 Material handling 32,000.00 Setups 100,000.00 Inspection 120,000.00 Currently, overhead is applied using a predetermined overhead rate, based on 80% of direct labor. The company has been asked to submit a bid for a proposed job. The plant manager feels that getting this job would result in new business in future years. Bids are based on full manufacturing cost plus 20 percent. Estimates for the proposed job are as follows: Direct materials 6,000.00 Direct labor (1k hours) 10,000.00 No. of materials moves 12.00 No. of inspections 10.00 No. of setups 2.00 No. of machine hours 500.00 In the past, full manufacturing cost has been calculated using normal costing. The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers. Expected activity for the four activity-based cost drivers that would be used are: Machine hours 20,000.00 Material moves 1,600.00 Setups 2,500.00 Quality Inspection 41,000.00 1. Determine the total cost (ABC) of the proposed job. a. 76,000 b. 75,349.27 c. 78,000 d. 73,549.27
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Mary Manufacturing has four categories of
| Maintenance | 200,000.00 |
| Material handling | 32,000.00 |
| Setups | 100,000.00 |
| Inspection | 120,000.00 |
Currently, overhead is applied using a predetermined overhead rate, based on 80% of direct labor.
The company has been asked to submit a bid for a proposed job. The plant manager feels that getting this job would result in new business in future years. Bids are based on full
Estimates for the proposed job are as follows:
| Direct materials | 6,000.00 |
| Direct labor (1k hours) | 10,000.00 |
| No. of materials moves | 12.00 |
| No. of inspections | 10.00 |
| No. of setups | 2.00 |
| No. of machine hours | 500.00 |
In the past, full manufacturing cost has been calculated using normal costing. The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers.
Expected activity for the four activity-based cost drivers that would be used are:
| Machine hours | 20,000.00 |
| Material moves | 1,600.00 |
| Setups | 2,500.00 |
| Quality Inspection | 41,000.00 |
1. Determine the total cost (ABC) of the proposed job.
a. 76,000
b. 75,349.27
c. 78,000
d. 73,549.27
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